Paper: Foreclosure Laws Indebted to History, Not Economics

A new paper concludes that states never adopted foreclosure laws based on broader economic reasons even though they’re playing a outsize role today in what’s happening with the housing market.

“Differences in mortgage laws have real consequences,” says Andra Ghent, a professor of real estate at Arizona State University’s W. P. Carey School of Business. Her study of state foreclosure laws over the past two centuries shows that “there do not seem to be clear economic reasons for why states adopted different procedures for the remedies they offer.”

Instead, many of today’s state-specific statutes arose out of historical accident, rulings of individual judges, and “relatively minor” differences in the wording of laws. Many of those foreclosure processes predate the U.S. Civil War.